“Will not need a major loan overhaul as the market has improved”
For Shriram Housing Finance (SHFL), which has completed a decade of operations, the second quarter of this fiscal year promises to be one of the highest quarters on record in terms of disbursements, said its managing director and chief. of management. Ravi Subramanian. In an interview with Mithun DasguptaSubramanian says the company would not need a “significant” loan restructuring in the future, as the market has improved. Edited excerpts:
How is the demand for home loans after the second wave of Covid compared to the first?
After the first wave of Covid, many pipeline transactions were put on hold from March to May. People who hit the market in June saw huge adoption starting in July (2020). During the last financial year, the third and fourth quarters were very good for most of the home loan players. We also achieved record numbers, as our disbursements last year were 95% higher than the previous year.
This fiscal year, there has been a slowdown in claims. The pickup was not of the same nature as last year. Nonetheless, by July (2021) the company had returned to last year’s selection levels. The demand for housing has accelerated. I just hope it holds up.
What percentage of home loan applications come from people who are already homeowners?
There is about a 10-15% increase in the number of people building additional rooms in their existing homes, which means people are going to get bigger. We have also seen a lot of people, who already own a house, come and buy a slightly larger house and clearly express the intention to sell the old house to meet the liabilities. This too was an increase of 10-15% from previous quarters. So there is an increase, there is a definite shift towards people buying larger properties.
SHFL’s disbursements for Q1FY22 amounted to Rs 221 crore, compared to Rs 77 crore for the same period of FY21. What will disbursements look like in the future?
The first quarter of fiscal 21 was a very slow quarter. The months of April and May of this year have been devastated. By June, we had returned to about 80% of our normal disbursements. By July, we were back to our figures from last year. We are therefore back on track in June and July, which means that activity has recovered significantly. My business grew thanks to Covid-19, in the sense that my numbers before Covid were not as high as they are today. Before Covid, a year was an investment period for us.
We had started to transform the organization, started to develop the book, started to build the distributions. So we were on the path to growth when Covid hit us. Q2FY21 was the first time our company broke the disbursement of 500 crore in one quarter. This year, in July, we have already recorded a disbursement of 225 crore, which is about 30% more than what we did in June. So, for the company, T2FY22 promises to be one of the highest quarters on record, if I’m going by July’s trajectory.
What are the factors that have contributed to the growth in numbers?
We had transformed the organization in terms of focus areas, customer segments and the products we wanted to launch during Q4FY19. After that, we invested in our people and focused on six southern and western states, and built our books. We aim to hit around 400-500 crore in about 24 months, which we will do. Today, we are one of the main players in housing finance in terms of growth in disbursements, assets under management, profitability and the quality of the new book’s portfolio. The quality of the new book’s portfolio is around 77% of our total book, which is best-in-class (in affordable home loans) today. We believe in slow and steady growth.
How many loans did the company restructure in the first quarter?
At T1FY22, we have restructured around Rs 72 crore in loans. In the previous quarter, we restructured loans of Rs 58 crore. In total, we have restructured approximately 3% of our portfolio, of which approximately 1.4% was outstanding until 30 days when we restructured. So it wasn’t just that we restructured overdue customers and higher level customers, but also the real customers who had paid and were going through some stress.
The collections in our restructured book are also very good. In fact, in July, on the new book, about 99% of our customers paid for at least one NDE. I don’t think we’re going to restructure anything major in the future because the market has improved.